Tata Tech IPO: Issue fully subscribed within an hour; set to smash TCS record

The highly-anticipated initial public offering (IPO) of Tata Technologies received an overwhelming response from investors and was fully subscribed within an hour of the bidding process on Wednesday. The ₹3,042.51 crore IPO of the Tata Group company has grabbed investors attention, being the first issue from the group firm in nearly two decades (18 years), after Tata Consultancy Services (TCS).

According to the data from BSE, Tata Tech IPO was subscribed 1.93 times by 11:27 am, on the back of broad-based response from all segments of investors. Participants made bids for 8,68,96,800 equity shares compared to the 4,50,29,207 equity shares offered for subscription.

The quota for retail investors was booked 1.68 times, while portions for non-institutional investors (NIIs) and qualified institutional buyers (QIBs) were subscribed 2.78 times and 1.98 times, respectively. The portion reserved for employee was subscribed 32%, while shareholders’ quota was booked 2.04 times.

As per the offer document filed with the SEBI, the company has reserved 50% of the issue for QIBs, 15% for NIIs, and the remaining 35% for retail investors. Besides, the firm has set aside 20.28 lakh equity shares for its employees and 60.85 lakh for Tata Motors shareholders.

The minimum lot size for investment is 30 shares, which means minimum application amount for retail investors will be ₹15,000 and ₹195,000 for 13 lots (390 shares).   

Given the attractive valuation and robust demand for the IPO as indicated by strong grey market premium (GMP), Tata Tech is likely to smash technology giant TCS IPO records on the first day of its opening. TCS came out with its IPO in the month of July 2004, with a price band of ₹775-900 per share, which was subscribed seven times. The TCS shares got listed on August 25, 2004, at a premium of 26.6% at ₹ 1,076 apiece.

On the other hand, Tata Technologies has set a price band at ₹475-500 per share for its public offer, which is completely an offer for sale (OFS) by existing shareholders. Tata Tech shares are currently trading at a 71% premium in the grey market, an unofficial market where shares can be bought and sold before they are listed on a stock exchange. Today, the grey market premium (GMP) was ₹355, unchanged from yesterday's GMP of ₹355, indicating listing price to be around ₹858. The shares of Pune-based company are slated to be listed on the BSE and NSE on December 5.

According to market analysts, the IPO is coming at a very attractive valuation of 32.5x, and it's a great opportunity for investors to encash listing gains as well as for long-term benefits.

Most analysts have recommended “subscribe” to the issue, citing its deep expertise in the automotive industry, well-recognised brand with experienced promoters, as well as healthy financial performance.

Meanwhile, analysts have highlighted some areas of concerns for the company, like any other business, such as dependence on a few top clients and third-party vendors, exposure to exchange rate fluctuations, and competitive industry. The company’s revenues are highly dependent on clients concentrated in the automotive segment. Also, it derives a major portion of its revenues from its top 5 clients, including Tata Motors and its British subsidiary Jaguar Land Rover (JLR).

The company generates around 80% of its revenue from services (majority from automotive), 11% from products, and 9% from education as of FY23. Apart from automotive, it will be key beneficiary of tailwinds in aerospace led by capacity expansion plans of aircraft manufacturers and MRO activities.

Tata Technologies, a subsidiary of Tata Motors, has deep domain expertise in the automotive industry and leverages this expertise to serve clients in adjacent industries, such as aerospace and transportation and construction heavy machinery (TCHM). As of Sep’23, the company had a global workforce of 12,451 employees serving multiple global clients from 19 global delivery centers in Asia Pacific, Europe, and North America.

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